Impact of Institutional Investors on Wealth Effects of Overseas M&A of Chinese Companies - Paper Sample

Introduction

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Mergers and acquisitions (M&A) refer to such transactions where the ownership of a company relates to a combination of owners. Merger and acquisition is a critical aspect of strategic management and therefore makes it possible for enterprises to either grow or shrink depending on a number of factors. Therefore, they have the potential of changing either the business competitive position or nature. Legally, a merger refers to a structured consolidation of two business entities into one. Acquisition however involves the full takeover of the other business entity. In the process, the stock and other assets of the letter move to the former. Commercially, both forms of transactions lead to the consolidation of assets and liabilities. The only difference is on the leadership. Unlike a merger, acquisition requires legal structuring an acquisition and therefore may place one business under the indirect ownership of another. Mergers however provide both business owners and partner a sense of partial ownership to the consolidated enterprise. Although the process is easy among local enterprises, it may not be the case between Chinese listed companies and the foreign firms oversees. The proposal, therefore, seeks to determine the effects of institutional investors on the wealth effects of such transactions.

Proposed Title

The proposal title is fundamental to the development of the subsequent proposal sections. It determines the kind of questions and the scope of the study. Therefore, any proposal must have a correct title to aid in its development. For this project, the title is; A Study on the impact of institutional investors on Wealth Effects of overseas M&A of Chinese Listed Companies.

Background and Rationale for the project

Institutional investment alludes to the participation of institutions in the business field. Most of the engagement involves the long-term and short-term involvement of such foreign institutions into the business operations of the host country. In many cases, such participation requires management, joint-venture, technology transfer and the exchange of expertise (Agarwal et al. 2011). Many researchers continue to examine this relationship releasing different results. For example, many studies showed that different determinants determine the operation of any given institution in their chosen location. Such differences in outcomes regard the activities of the foreign institutions in the Chinese market.

Currently, research shows that chine is the world's fastest-growing economy. According to the World Economic Forum, China comes 2nd after the United States regarding the size of their economy. The same institution predicts that China may surpass the US and become the most significant economy by 2050 (Gray 2017). Although a lot of factors influence economic growth, recent research suggests that institutional investors play a critical role in developing countries as they accelerate the speed of economic development. The indicators arouse the concern of different researchers (Mahar, 2016). Additionally, the growing economy in China is a trending point of discussion worldwide thereby provoking a lot of interest to establish research.

Subsequently, a lot of research continues to appear mainly on the relationship of the economic growth and the Chinese foreign institutions. The researchers consider various dependent variables to show the effects of such international institutions and their role in China's investment (Marsh, & Mackenstein, 2014). However, the research have failed to show the Openness of Trade variable even though the same studies shows a positive relationship conducted by researchers to evaluate the association of institutional investment and China's GDP (Grey, 2017). Therefore it fundamentally aroused and determined the addition of specific variables. Finally, China remains one of the largest countries both in Asia and across the world. Consequently, it continues to develop essential cities including Shanghai, Beijing, and Shenzhen.

Preliminary Review of the Literature

Dunning (2016) identifies four major four types of motivational indicators foreign institutions to engage in either merger or acquisition with Chinese listed firms. The four categories include natural resource, market, efficiency, and strategic asset seekers. Moreover, (Du et al., 2016) states that all of the seekers correlate with their main factors determining the Wealth Effects of overseas M&A, especially for Chinese listed companies. According to National Bureau of China (2017) however, the theories much help in the understanding of the choice of the investment location. Chinese listed companies, for example, undergoes specific policy changes geared towards the improvement of such relationships and promote inward investment. World Bank (2017) on the other hand suggests different vital determinants including policies supporting infrastructural development of such transactions.

However, the decision by a company to either marge of acquire another's assets have a continuous variation and may not be accurate because some of the bases on the objectives of the various companies operating in China. According to Zhang, (2017), the move by many Japanese companies merge by their Chinese counterparts remains a dream. Teloet al., (2017) believes that the difficulty results from the inefficient legel framework between the two nations. However, Belderbos et al. (2002) suggests that the engagements must be dynamic because of the intention of the companies and the changes in the policy framework. Fetscherin et al., (2010 echoes similar sentiments that; contrary to the case in many other developing nations, many institutional developments in China engage in joint venture with the local firms. The indicators continue to ease the work done by foreign institutions. Fetscherin et al., (2010) further suggests for an examination of the relationship and the impact that the international institutions pose to the overall development of the local firms.

According to Libman, (2016), engagenment with foreign institutions becomes one of Chinese economic strengths. Currently, China is one of the best global business destinations with some of the best thriving industries and global market. It is a result of the 1979 economic reform that involved the opening of the People's Republic of China to the worldwide market. Over the years, the Chinese market experienced a 23.6%. The growth moved from US$1billion in 1980 to a higher amount of US$83billion in 2010 (Chadee, and Schlichting, 2017). Therefore, China continues to grow its economic strength becoming one of the most influential countries that provide destinations to top global companies. The stud, thus, explores the impact of institutional investors on the wealth effects of overseas M&A paying attention to the Chinese companies.

Research Questions

The research questions helped in guiding the study to ensure that the researchers do not handle issues that are out of question. Research questions guarantee that the survey streamlines itself with the project title and the scope of their initiative. Listed below are some of the research questions laid out for the project.

What are the impacts of institutional investors on Wealth Effects of overseas Merger and Acquisition?

What are the factors impeding the merger or acquisition between Chinese listed companies and their foreign counterparts?

What is the impact of institutional investment on the wealth effects of M&A?

Research Objectives

In line with the research questions, the project seeks to achieve specific goals and objectives. The objectives help the researcher to keep in line with the project title to ensure that answers to the research questions come out handy. Listed below are some of the objectives of the project.

To investigate and review the current literature on the factors behind Chinese listed companies' inability engage in M&A with oversees companies.

To examine the impact of institutional investors on Wealth Effects of overseas M&A

To compare the results of findings to other researchers.

Research Plan/Methodology

In this part, we depict the technique used to close the issue tended to in this exploration archive. Here we legitimize sources utilized as a part of the examination and furthermore call attention to the motivations to seek after the investigation, its constraints, and additional steps taken to foresee or make them to account (Iqbal et al., 2013). The examination is set to depict the most essential parts of the connection amongst China and other nations and its individuals about institutional investors on Wealth Effects of overseas M&A of Chinese Listed Companies. The archive will likewise examine the financial and political ramifications of the advancement of the initiative that may influence the incorporation of foreign institutions. The examination will, for the most part, depend on writing from contextual analyses and other abstract articles written concerning the issue. The report will found on free sources essentially. It is subjective data to clarify the institutional investors on Wealth Effects of overseas M&A of China, especially for the Listed Companies (Moolio, and Guechheang, 2013). After the presentation, writing audit and methodological part then we have the foundation segment that clarifies what the one street, one belt activity and why it creates and what inspired China to begin this activity. It is additionally critical to take note of that the examination expands on the presumption that the improvement of the institutional investors especially for foreign institutions.

Data Collection

Interviews and questionnairesThe team will use interviews in the study is the interviews and the issuance of surveys to collect the views of different stakeholders. Meetings are the most effective ways of obtaining information the people since they subject the conversations to the process of data collection at the same time with the interviewer. Furthermore, this method can be done either verbally or in a written. According to other literature in this work, interviewing the people provides an opportunity to get the actual information without fail. Furthermore, it is emerging that interviews offer more accurate information that observation. Moreover, in the case of inspection, the researchers make their conclusions on the subject matter without considering the people's ideas. In this method, however, the researcher has to get the answers to the already set questions from the people themselves.

Secondary sources

The project will use secondary sources in two significant ways. First, they were used to give contextual information that was relevant to the research topic. Also, it comes as a method of obser...